Background

Samaritan Village is an affordable, 83-unit senior housing project located in Corvallis, Oregon. The project was developed in 1966 under HUD’s Section 202 direct loan program. Only 25 of the units benefitted from project-based rental assistance, while the remaining 58 units were non-assisted. The project was in desperate need of capital improvements. The non-profit owner approached Rockhall just several months prior to maturity of the Section 202 loan on the property.  

Challenges

This project faced several substantial challenges:

• The transaction was on an extremely tight timeframe as the Section 202 loan was nearing maturity and the owners risked losing their developer fee and other benefits provided for refinancing Section 202direct loans. 
• The project maintained a mandatory meal program which made it ineligible for refinance under HUD’s multifamily program.
• The non-assisted units posed a significant challenge as rents on these units could not be increased.  
• While well maintained, the project is older and still has the original construction building system in place.  A number of significant capital repairs were needed.

Outcome

Rockhall drew upon its expertise in the Section 202 and Section 8 Housing programs to navigate the 202 prepayment process and obtain approval for a significant Section 8 budget-based rent increase. Additionally, Rockhall worked closely with HUD asset management to transfer project-based subsidies from another project opting out of the program to the subject’s non-assisted units. This allowed the project to generate the requisite rental income to support the necessary rehab. Rockhall worked closely with the owner to restructure the meal program to make it eligible under the program. Rockhall utilized FHA insured financing to pay off the remaining balance on the 202 loan and flexible subsidy loan; fund $850,000 for repairs, improvements and accessibility modifications; fund a significant deposit to replacement reserves for future updates and provide the owner with a 15% developer fee. Rockhall closed the loan within just 3 months of submitting the application to HUD and just prior to the Section 202 loan maturity. The 202 prepayment/refinance locked in a low fixed interest rate for a 35-year term, and provided the project with a new Section 8 HAP contract for a 20-year term, ensuring the long-term affordability and economic viability of the project